The Office for Budget Responsibility (OBR) will release their forecasts for debt sustainability and growth Thursday. Whatever they report will influence the strength of sterling and the perceived UK market risk premium. The forecasts should influence the decisions the UK government and other institutions take in the coming weeks and months.

The forecasts for UK inflation have fluctuated more than the value of the pound this year, compounding discounted cash flow analysis problems for business valuers. Only 60 days ago, concensus forecasts for 2023 UK inflation were in the 18% range. November delivered better news. The Bank of England (BoE) hiked interest rates 75 basis points two weeks ago. They now forecast that inflation will peak at 11% this quarter—and the UK CPI will begin to fall sharply (toward 1.4%) in 2023 and 2024.

Sadly, the BoE also predicts a decline of 1.9% for GDP in 2023 and a 0.1% decline for 2024. Given the strong $US, the pound is unlikely to make up much ground soon. As of November …